ASSET LIQUIDATION – A FEASIBLE OPTION

There were discussions on what TERshould do in terms of corporate strategy - given the still resilient demand forthermal coal. Suggestions ranging from continuing high dividend pay-outs,dividend pay-outs plus share buyback, company should set aside cash to investin its assets to prolong mine life etc.

In my view, it is clear that no one knows what the demand/supply dynamics for the coal industry will be like for thenext 1 year, 3 years or 6 years. Such industry uncertainty poses immense difficulty for corporate planners. I am swayed towards the option that TER should embark on a liquidationmode, i.e. to strategically dispose assets and return cash to shareholders. Inthe meantime, TER should generate as much operating FCF on quarterly basis andpay out surplus cash to holders.

Share buybacks and/or capexinvestments in an uncertain industry environment make little economic sense and may notenhance shareholder value.

First asset on the block should beits investments in South Africa. As for the Australian assets, securing longterm sale contracts would be hugely beneficial – both for dividend pay-outs andfor future negotiations with buyers. TER has one of the best annual FCF yield andits Australian assets should attract potential buyers (with a longer term outlook).

Just my thoughts. Am looking forward to the impending dividend announcementthis month.